Revvity, Inc.

ladies and gentlemen thank you for joining us and welcome to the q3 2025 revity earnings conference call after today's prepared remarks we will host a question and answer session if you would like to ask a question please raise your hand if you have dialed into today's call please press star 9 to raise your hand and star 6 to unmute i will now hand the conference over to steve willoughby svp investor relations steve please go ahead thank you operator good morning everyone and welcome to revity's third quarter 2025 earnings conference call

On the call with me today are Prahlad Singh, our President and Chief Executive Officer, and Max Grykowiak, our Senior Vice President and Chief Financial Officer. I'd like to remind you of the safe harbor statements in our press release issued earlier this morning and those in our SEC filings. Statements or comments made on this call may be forward-looking statements, which may include but may not be limited to financial projections or other statements of the company's plans, objectives, expectations, or intentions. The company's actual results may differ significantly from those projected or suggested due to a variety of factors which are discussed in detail in our SEC filings. Any forward-looking statements made today represent our views as of today. We disclaim any obligation to update these forward-looking statements in the future, even if our estimates change. So you should not rely on any of today's statements as representing our views as of any date after today. During this call, we'll be referring to certain non-GAAP financial measures. A reconciliation of the measures we plan to use during this call to the most directly comparable GAAP measures is available as an attachment to our earnings press release. I'll now turn it over to our President and Chief Executive Officer, Prahlad Singh. Prahlad?

Thank you, Steve, and good morning, everyone. I'm glad you are able to join us this morning to discuss our third quarter results. and our updated outlook for the rest of the year. We continued to perform well during the third quarter and achieved our objectives during what continued to be a dynamic end market environment. We are consistently executing at a high level on those items which are more fully within our control, such as our margins, cash flow generation, opportunistic capital deployment, and a strong and consistent pipeline of bringing meaningful new innovations to market, which I will touch on more in a bit. While the current demand environment continues to remain stable, I'm increasingly optimistic that some of the larger industry overhangs we and others have been impacted by so far this year appear to be starting to gain clarity. which should continue to improve customer confidence levels and lead to more robust levels of investment into science. Our third quarter results overall were in line with our expectations with 1% organic growth being slightly offset by less favorable FX tailwinds due to the changes in currency throughout the quarter. Our signals software business continued to perform extremely well, growing 20% organically in the quarter, which again included even stronger SAS performance and conversion. Our reproductive health business also continued to perform exceptionally well and grew in the mid single digits year over year, with newborn screening again growing in the high single digits in the quarter. We anticipate continued strong performance in this business as we bring additional novel products and workflows to the market. A recent example of this is our new Neo LHD 7 Plex kit, which recently received IVDR approval in Europe and is awaiting FDA clearance, expected early next year. This expanded assay will complement our existing capabilities to now also include screening for MPS II, otherwise known as Hunter's syndrome. We also remain diligent with our expenses in the quarter and generated 26.1% adjusted operating margins, which were modestly above our expectations. With some additional favorability below the line, we generated adjusted earnings per share of $1.18, which was 5 cents above the midpoint of our guidance. Additionally, we continue to have a strong focus on cash flow generation and our capital deployment priorities. In the third quarter, we generated free cash flow of 120 million and also received the final $38 million brand payment related to our large divestiture from two years ago. This free cash flow continued to represent approximately 90% of our adjusted net income, solidly above our longer term expectations. Given our strong balance sheet position and disciplined M&A criteria, we again actively redeployed this cash by repurchasing our shares. In the third quarter, we spent $205 million repurchasing approximately 2.3 million shares. This brings our total buyback activity since we've completed the divestiture two and a half years ago to 12.5 million shares or 10% of the total shares we had outstanding at the end of the first quarter of 2023. Given our commitment to disciplined capital deployment, we recently received a new $1 billion share repurchase authorization from our board, which will replace what was left on our existing program. This new share repurchase program will provide us plenty of capacity to continue to meaningfully deploy capital in this area over the next two years. As we look ahead to the fourth quarter and into next year, Although end markets have continued to remain relatively stable, I'm increasingly optimistic on our future performance given recent signs that the impact from certain larger industry overhangs are becoming more transparent. However, for the time being, we want to remain prudent in our assumptions until we see sustained improvements in broader industry demand trends. While Max will provide more color on our updated guidance in a moment, at a high level, we are reiterating our 2 to 4% organic growth expectation for this year, while raising our adjusted earnings per share guidance to a new range of $4.90 to $5 to account for our outperformance in the third quarter. As we view our markets today, our best and most prudent assumption for next year is that organic growth continues to remain similar to what it has been over the last several years in the 2% to 3% range, but we see opportunity for improvements once customers consistently return to more historically normal levels of spending. While we have started to see some promising signs with customer activity levels in October, we want to see how the remainder of the year plays out before factoring in potentially more robust levels of growth for next year. Within the 2% to 3% growth scenario, we also remain confident with our 28% adjusted operating margin baseline expectation for next year. given the restructuring activities that are already well underway. I'd now like to take a moment to share some perspective on how we've been executing at a high level, both scientifically and commercially, as a number of the key initiatives we've highlighted publicly over the last year are now beginning to come to fruition. While the following are all great achievements on their own, I'd note our near-term pipeline is even more exciting and potentially impactful for the company overall. First, let me start with AI. While much has been said about how AI is being used or sometimes not used in the corporate world, at Revity, we are bringing real-world AI-based solutions to market for our customers at a rapid pace. This is not just automated note-taking or digital image creation, but rather true productivity improvements for our customers, in addition to new solutions which are changing and advancing how science is being done. In the past year alone, we have commercially launched new AI-focused software offerings, such as Signals One in our signals business, transcribe AI in reproductive health and phenologic AI in a high content screening franchise. We have also entered into a new collaboration with ProFluent Bio to offer novel AI engineered enzymes with our pinpoint based editing system. And only a month ago we announced the introduction of our new Living Image Synergy AI software platform for use with our in vivo imaging instruments. This new offering helps reduce the time needed for scientists to manually review and highlight images of potential interest for further evaluation from several hours to a few minutes. freeing up significant capacity for these scientists to focus more of their time on uncovering even higher level insights. While these are all great examples of how we are rapidly embedding AI's capabilities into new offerings for our customers, our development pipeline for additional new AI-based products is even more robust. We believe some of the novel solutions we are currently working on, which are not all that far away from coming to market, have the potential to truly change scientific paradigms and how preclinical discovery is done. I know that is a bold statement, but I could not be more excited about how our teams are embracing the power and potential of AI internally. but even more so what we are working on externally for our customers and the advancement of science. I look forward to sharing more on this with you in the coming months. In addition to delivering on our own innovation commitments, we are also making strong progress in bringing our strategic partnerships to fruition. Many of these collaborations have been years in the making and were first highlighted externally at our investor day last November. One recent example includes our sequencing partnership with Genomics England and its large generation study announced earlier this year with work beginning in the third quarter. When I visited our new lab in Manchester earlier this month, I learned about a powerful real-life example that's already come out of this study, which was recently featured by the BBC. Baby Freddy was among the first infants screened through the program. Within his first month of life, clinicians were able to identify a genetic condition linked to a rare form of eye cancer because of his participation in the study. Although he showed no symptoms and had no family history, follow-up testing confirmed he had a tumor on his eye. Thanks to the early detection, Freddie received laser and chemotherapy treatment, greatly improving his chances of normal vision as he grows up. While Freddie's story reflects the broader impact of the study, It highlights why our collaboration with Genomics England matters so deeply. Enabling transformative discoveries that can change and even save lives before families know there's a problem. A second key partnership was just announced earlier this month in collaboration with Sanofi. In this new relationship, we are developing and seeking global regulatory approvals for a new four-plex assay for the early screening of type 1 diabetes, while at the same time working to expand availability of our existing REO assay within our global clinical lab network. With Sanofi's disease-modifying therapy for delaying the onset of type 1 diabetes, T-Zield now approved in many jurisdictions around the world, including the US, and with recent regulatory advancements, such as Italy's new requirement to screen all children in the country for the disease. We believe this new assay has the potential to be a meaningful contributor to our diagnostics franchise once it receives regulatory approvals. While these are two recent examples of our strategic partnership efforts coming to fruition, our pipeline of additional projects continue to remain very active. And I expect you will hear more from us on these opportunities quite soon. I also wanted to take a moment to highlight the recent publication of our annual impact report, which showcases how our work is not only advancing science and healthcare, but is doing so in a sustainable way that keeps the best interests of our employees and communities we serve front and center. Highlights from this year's report include the company having a 6% reduction in our scope one and two emissions in 2024, and how we were able to divert 47% of our waste from landfills last year ahead of our multi-year goal. We achieved a 77% employee satisfaction rate in our recent all employee survey, which was above our target and were able to expand our STEM scholarship initiatives to two additional universities in China and the UK. These efforts are being recognized as we recently received a triple A rating from the well-known ESG rating agency, MSCI. which is its highest possible rating and is above most of our peers. I couldn't be more proud of our efforts in this area. Overall, we are making tangible progress on some of our key strategic partnerships and new product launch initiatives, with even more significant announcements hopefully coming very soon. We have done a good job navigating the dynamic market environment so far this year and are managing the business appropriately to continue to deliver on our earnings expectations for the year, while setting us up for even stronger financial performance in the future. I am increasingly optimistic that several key market uncertainties are beginning to ease. positioning us to benefit as demand eventually returns to more normalized levels. We are performing well, and the future is extremely bright for Revity as we help shape how drug discovery and development is done in new ways in the years to come, while also driving advancements in specialty clinical diagnostics, which are having a meaningful impact on human health. With that, I will now turn the call over to Max.